For Better or for Worse: Recent PIPEDA Amendments

Bill S-4, the Digital Privacy Act has received royal assent and is now law. This bill amends Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA, Canada’s private sector data protection statute has been badly in need of updating for some time now. Although it only came into being in 2001, the technologies impacting personal information and the growing private sector thirst for such data have changed dramatically, rapidly outstripping the effectiveness of the legislation. There have been many calls for the reform of PIPEDA (perhaps most notably from successive Privacy Commissioners). The Digital Privacy Act addresses a handful of issues – some quite important, but leaves much more to be done. In this post I consider three of the changes: new data sharing powers for private sector organizations, data breach notification requirements, and a new definition of consent.

At least one of the amendments is considered a step backwards by privacy advocates. A new s. 7(3)(d.1) allows private sector organizations to share personal information between themselves without the knowledge or consent of the individuals to whom the information pertains for the purposes of investigating breaches of “agreements” or laws. Originally seen as a measure that would make it easier for organizations such as banks to investigate complex fraud schemes that might involve a fraudster dealing with multiple organizations, the growing awareness of the vulnerability of individuals to snooping and information sharing of all kinds, has made this provision the target of significant criticism by privacy advocates. Keep in mind that an “agreement” can be a user agreement with an ISP, the terms of use of a web site or other online service, or any other contract between an individual and an organization. The provision means that any company that suspects that one of the terms of an agreement to which it is party has been breached can ask other companies to share information – without the knowledge or consent of the individual or without a court order – in order to investigate this potential breach.There is a profound lack of transparency and accountability in the data sharing enabled by this provision.True, such sharing is not mandatory – an organization can refuse to share the information requested under this provision. This amendment places an onus on individuals to pressure organizations to give them clearer and more robust assurances regarding whether and how their personal information will be shared.

The amendments will also add to PIPEDA data breach notification requirements. This is a change long sought by privacy advocates. Essentially, the law will require an organization that has experienced a data security breach to report the breach to the Privacy Commissioner “if it is reasonable in the circumstances to believe that the breach creates a real risk of significant harm to an individual.” (s. 10.1) Affected individuals must also be notified in the same circumstances. “Significant harm” is defined in the legislation as including “bodily harm, humiliation, damage to reputation or relationships, loss of employment, business or professional opportunities, financial loss, identity theft, negative effects on the credit record and damage to or loss of property.” A determination of whether there is a “real risk” of these types of harms can be determined by considering two factors spelled out in the legislation: the sensitivity of the information at issue, and the likelihood that it is being misused or may be misused in the future. Any other “prescribed factor” must also be taken into account, leaving room to include other considerations in the regulations that will be required to implement these provisions. The real impact of these data breach notification provisions will largely turn on how “real risk” and “significant harm” are interpreted and applied. It is important to note as well that these provisions are the one part of the new law that is not yet in force. The data breach notification provisions are peppered throughout with references to “prescribed” information or requirements. This means that to come into effect, regulations are required. It is not clear what the timeline is for any such regulations. Those who have been holding their breath waiting for data breach notification requirements may just have to give in and inhale now in order to avoid asphyxiation.

One amendment that I find particularly interesting is a brand new definition of consent. PIPEDA is a consent-based data protection regime. That is, it is premised on the idea that individuals make free and informed choices about who gets to use their personal information and for what purposes. Consent is, of course, becoming somewhat of a joke. There are too many privacy policies, they are too long and too convoluted for people either to have the time to read them all or be capable of understanding them.It doesn’t help that they are often framed in very open-ended terms which do not give a clear indication of how personal information will be used by the organization seeking consent. In this context, the new definition is particularly intriguing. Section 6.1 of the statute now reads:

6.1 For the purposes of clause 4.3 of Schedule 1, the consent of an individual is only valid if it is reasonable to expect that an individual to whom the organization’s activities are directed would understand the nature, purpose and consequences of the collection, use or disclosure of the personal information to which they are consenting.

This is a rather astonishing threshold for consent – and one that is very consumer-friendly. It requires that the individual understand “the nature, purpose and consequences” of the use of their personal information to which they consent. In our networked, conglomerated and big-data dominated economy, I am not sure how anyone can fully understand the consequences of the collection, use or disclosure of much of their personal information. Given a fulsome interpretation this provision could prove a powerful tool for protecting consumer privacy. Organizations should take note. At the very least it places a much greater onus on them to formulate clear, accessible and precise privacy policies.